The Central Bank of the Republic of Turkey (CBRT) on Monday announced that it had decided to complete the simplification process regarding the operational framework of the monetary policy.
"One-week repo rate will be the policy rate of the Central Bank," it said. "This rate will be equal to the current funding rate (16.5 percent)."
The current one-week repo rate is at 8 percent, whereas the overnight lending rate is at 9.25 percent.
"Central Bank overnight borrowing and lending rates will be determined at 150 basis points below/above the one-week repo rate," the CBRT added.
The bank stated that the new operational framework will take effect on June 1.
Following the CBRT's move, the U.S. dollar retreated as low as 4.57 against Turkish lira from 4.65 level earlier in the day. The dollar closed trading at 4.70 on Friday, after hitting a record high of 4.92 on Friday.
The euro also fell from 5.46 to 5.32.
In a separate statement on Monday, the CBRT said that its total reserves amounted to $112 billion as of April 30. Official reserve assets rose 1.5 percent, compared to $110.3 billion at the end of March, according to the CBRT's international reserves and foreign currency liquidity report.
In April, foreign currency reserves -- in convertible foreign currencies -- stood at $85.3 billion, marking a 2.3-percent increase on a monthly basis.
Gold reserves -- including gold deposits and, if appropriate, gold swapped -- fell 1 percent last month to $25.1 billion, compared to the previous month.
According to the official figures, the CBRT's total reserves recorded a 9-percent hike, compared to the $102.7 billion at the end of April 2017. Over the last decade, the bank's official reserve assets increased by nearly 45 percent.
In mid-December 2013, the bank's total reserves saw a historic high at nearly $136 billion, of which some $21 billion were in gold reserves.
The bank noted that short-term predetermined net drains of the central government and the CBRT -- foreign currency loans, securities and foreign exchange deposit accounts of residents abroad within the CBRT -- decreased by 7.3 percent last month compared to March, down to $11 billion.
"Of this amount, $6.8 billion belongs to principal repayments and $4.2 billion to interest repayments," said the Central Bank. "Regarding the maturity breakdown of the principal and interest payments, $1.2 billion is due in one month, $0.8 billion in 2-3 months, $9 billion in 4-12 months."
The CBRT report also revealed that contingent short-term net drains on foreign currency stood at $65 billion in April, dropping 2.6 percent compared to the previous month.
According to the bank's definition, contingent short-term net drains on foreign currency consists of "collateral guarantees on debt due within one year" and "other contingent liabilities" which are the banking sector's required reserves in blocked accounts in foreign currency and gold, and letters of credit items on the CBRT's balance sheet.